Month: January 2018

Initial Coin Offerings – ICO

ICO’s are no more just a buzz word, as they attracted over 6 billion USD of investment in the year 2017, compared to 295 million USD generated from the year 2014 to 2016. This steady growth shows how serious investors are getting towards ICO’s and experts believe that this is just the start, ICO’s have a way bigger market in years to come.

What is Initial Coin Offerings (ICO’s)?

An ICO allows startups to generate money for their future roadmaps. Every ICO has two main components, business idea driving the project and cryptocurrency. The business idea of ICO can be anything. There is currently no bracket of what can be and cannot be an ICO. It’s generally an innovative idea that can give good monetary returns to investors. The second part is the cryptocurrency, every ICO has its own cryptocurrency in which overall trading of its ecosystem takes place.

To tell investors about necessary details of an ICO, every ICO has a document called whitepaper. A whitepaper has every detail related to the ICO like what business idea it has, the underlying technology, breakdown of its cryptocurrency, founding members details. You may call whitepaper an X-Ray of an ICO.

Filecoin is considered to be most successful ICO launched till date, as it generated capital of around 257 million USD. The idea behind Filecoin is to create a decentralized storage network across the internet by using IPFS (InterPlanetary File System) protocol. Filecoin is managed by a community of developers worldwide who cares about future of the internet. There is a lot of storage available online that is not used at all for instance in data centers, home PCs etc. Filecoin users will be able to use that storage by using Filecoin tokens, the incentive for people offering their storage facility is also Filecoin tokens. The idea is to make a decentralized storage facility not controlled by individuals.

Tezos is second most successful ICO after Filecoin, as it closed its ICO sale by generating 65703 Bitcoin and 36122 Ethereum.

According to the Tezos website, “Tezos is a new decentralized blockchain that governs itself by establishing a true digital commonwealth.”

First generation blockchain doesn’t have any on-chain mechanism to seamlessly amend the rules governing its protocol and explicitly fund protocol development, as a result, design choices are restricted only to core development teams and miners. Tezos amend this legacy monopoly by creating rules for stakeholders to approve protocol upgrades that are then automatically deployed on the network.

Tezos is next generation smart contract platform with Michelson as its own programming language. Whenever protocol changes need to be made, Tezos implements voting rights with its built-in consensus mechanism.

Conclusion

Majority of ICO’s tokens are launched at cheap prices. It’s good to invest in solid ICO’s as they will dominate future years. If you think ICO’s are useless and can never take off, remember today’s 15000 USD Bitcoin was 0.008 in 2009.

You can find a classic representation of four years history of ICO’s here.

Cryptocurrency Regulations

One of the biggest advantage of cryptocurrencies includes anonymous user ID’s, non-traceable transactions and free from unified control. All these advantages are double edge sword, for some people they may be heaven facilities but for governments all around the world they are annoying.

As governments have zero control over cryptocurrencies they are not taxable and there is no check by regulatory bodies to see who is sending money to who. You still think any government will accept such currency? For cryptocurrencies, the governments have a big no.

The chairman of the U.S. Securities and Exchange Commission, Jay Clayton said in a meeting at the Federal Reserve Bank of New York “Where we see fraud, and where we see people engaging in offerings that are not registered, we are going to pursue them because these types of things have a destabilizing effect on the market.”

EU and UK governments are planning to have a crackdown on cryptocurrencies due to increase in crime and tax evasion fears. As per EU plan, online platforms where cryptocurrencies are traded will be required to carry out due diligence on customers and report suspicious transactions.

Government Regulations on Initial Coin Offerings (ICO’s)

Here is what popular governments around the world say about ICO’s.

USA

U.S. Securities and Exchange Commission SEC verdict about ICO

“Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities laws, your ability to recover may be significantly limited.”

An ICO will come under federal securities laws only if the virtual coins or tokens offered by ICO fall in the category of securities. If you want to get assistance from U.S. Securities and Exchange Commission make sure the ICO you are investing is registered with SEC.

UK

Financial Conduct Authority FCA of UK declares majority of ICOs outside its regulated space. Only few ICOs that involve regulated investments fell under FCA regulations. It’s extremely unlikely to have access to UK regulatory protections like the Financial Services Compensation Scheme or the Financial Ombudsman Service in case you have some problem with your ICO.

In the same month, Financial Services Commission of South Korea also banned all sort of ICO stating that “We expressed a serious concern that the recent inflow of funds into the nonproductive speculative direction is showing up. As a result, we believe that additional measures are inevitable in order to switch to productive investment.”

Regulated Cryptocurrencies

There are regulated cryptocurrencies like Ripple and IOTA, currently trading at number three and nine. Ripple is widely used by banks all around the world for fund transfer. The future of legalizing cryptocurrencies lies with such regulated cryptocurrencies as there are zero chances that governments may accept the unregulated ones like Ethereum, and several Altcoin.

The Era of Blockchain

The era of Blockchain started in 2008 when Bitcoin was introduced by an unknown person named Satoshi Nakamoto. It is believed that Satoshi Nakamoto is a group of entrepreneurs since the idea is clearly bigger than one person job. Satoshi Nakamoto famous Paper was published through a metzdowd.com cryptography mailing list on October 31, 2008, in which he introduces a peer-to-peer electronic cash system that allows direct online payments from one party to another without going through a financial institution like banks. The cash system was based on the proof-of-work system to reach consensus and to address the double spending problem. The cash system is free from all kind of cyber attacks as it’s decentralized and distributed across various nodes worldwide.

Today more than 1000 cryptocurrencies are present but the underlying technology of every cryptocurrency is blockchain. The blockchain is considered to be the biggest revolution since the industrial revolution, it’s transforming the global financial system. Cryptocurrency market cap crossed 600 billion USD on 18 Dec, 2018.

Here is how blockchain is transforming the world.

Business for Everyone

The first generation Blockchains were limited to carry out transactions only. Vitalik Buterin created Ethereum blockchain in 2015 that allow everyone to develop his own Distributed application (DAPP) over it. This further led to the idea of Initial Coin Offerings (ICO’s) where anyone can create and launch his application and gather funds from investors for future roadmaps. ICO’s generated over 6 billion USD in year 2017.

Financial Services for Everyone

According to world bank, 40% of world adult population and approx 2 billion people of the world are outside the banking system today due to various reasons, limiting many to state of poverty and discouragement.

The blockchain and cryptocurrency residing over it let everyone to access financial services. Anyone having internet access is eligible to use cryptocurrency and can send or receive funds from anywhere.

Inflation free Currency

Almost all fiat currencies have gone down in their values over time. It’s due to fact that as more notes are printed price of currency goes down. Cryptocurrencies are free from inflation, as there are finite number of coins for every cryptocurrency.

Tokenization of Assets

Tokenization of real world assets is the new way of doing business over blockchain. Tokens are sort of bridge between blockchain and real world assets as they put real world assets over the blockchain.

A digital token may represent Gold, Real Estate, Shares of a company or any other asset that can be traded. The aim of tokenization is to achieve security, speed and ease of transfer of Altcoin or any other cryptocurrency, combined with real physical assets.

Altcoin is just a cryptocurrency it has no physical backing of any physical asset. There are many asset backed tokens available that have backing of real assets like Crowdbridge Global and Zabercoin.